In 2002, for example, the United Kingdom became the first market to require a shareholder advisory vote on board pay, which was coupled with the introduction of required disclosure of key compensation data.

The 2002 remuneration report regulations formalized what most of Britain's larger companies had already been doing--in keeping with local best practice recommendations--while also ensuring that such regulations extended to smaller and middle-capital firms. By specifying that a reasonably comprehensive level of information had to be provided, the regulations helped to raise reporting standards and provided a level basis for comparing individual and group compensation elements.

In the United Kingdom, the ability for shareholders to vote on the remuneration report was perceived as a way to provide a separate outlet for concerns that previously resulted in votes being dispersed across a range of resolutions, such as votes against directors who were remuneration committee members or who might have been executives themselves.

In other cases, compensation concerns were significant but not sufficient to merit voting against directors. Consequently, the ability to consistently and more effectively express views on pay has been welcomed by investors and has proved a valuable tool in encouraging companies to improve their practices. Specific high-profile examples of high-dissent votes (or even defeats, such as GlaxoSmithKline in 2003) help to demonstrate the importance of the regulations.

The required vote has contributed to a significant increase in constructive dialogue between companies and investors on this issue in the U.K. market. Rob Burdett, a partner at the London-based consulting group New Bridge Street, told the Financial Times in August that the 2006 annual meeting season "has been less fraught this year than in previous years, with companies listening to shareholders."

Underscoring the change, New Bridge Street's study of basic salaries of top executives at Britain's largest 100 companies notes a rise between 5 and 6 percent in 2006, to a median of £785,000 ($1.5 million). This compares with yearly rises of about 14 percent five years ago, before the advisory vote rules were put into place.

U.K. companies' strategy of quelling shareholder rebellions through engagement is being copied elsewhere. In Australia--another market where the remuneration report is submitted for (non-binding) shareholder approval--larger companies are attempting to avoid confrontations with shareholders at general meetings by consulting with investors in advance of the remuneration report vote.

Though just one Australian firm (Novogen) has so far had its remuneration report rejected by a majority of shareholders, several have received "against" votes of more than 40 percent. But analysts predict engagement with shareholders will continue, and possibly increase, during the forthcoming 2006 annual meeting season as companies seek to lower opposition levels.

Like the U.K. and Australia, Sweden's "comply or explain" style Corporate Governance Code recommends that corporate boards get approval for policies on remuneration and other terms of employment for senior management. This best practice provision has not been enshrined in law.

According to the code--which now applies to companies listed on the two major indices of the Stockholm Stock Exchange with revenues of over SEK 2 billion ($275 million)--firms should disclose: the relative importance of fixed and variable components of the remuneration and the linkage between performance and remuneration; the principal terms of bonus and incentive plans; the principal terms of non-monetary benefits, pension, notice of termination and severance pay; and the members of senior management covered by the terms.

During the 2006 proxy season, 74 Swedish companies of 81 subject to the code put executive remuneration up for shareholder approval, according to ISS records. Of the 74, roughly one-quarter chose to do so voluntarily. But the relatively relaxed definition of what information should be disclosed, coupled with the lack of established best practices in the market, led to notable variances in disclosure levels among companies. Some companies were content with disclosing an absolute minimum thus defying the purpose of having this resolution.

The Netherlands, notably, has gone one step beyond the advisory vote method used in the United Kingdom and Australia. By recommendation of the Dutch Tabaksblat Code on corporate governance, the compensation policies of Netherlands-based firms must be put to a binding--rather than advisory--vote at general meetings of shareholders.

Investors in Dutch companies also must approve cases where the non-executive supervisory board intends to materially change the remuneration policy for management board members. The approval procedure consists of an "ex-ante" approval, which can have far-reaching consequences if shareholders do not vote in favor. In such instances, the company would be unable to implement a new compensation policy and would be forced to maintain existing policies.

The Dutch code also enhances disclosure of pay elements such as the ratio of variable versus fixed remuneration, peer group companies' pay, severance arrangements, pension plan payments, and performance criteria for any performance-related payment.

Though it remains unclear whether recent measures to increase corporate accountability for compensation policies and practices in these markets will ensure sustainable long-term improvements and higher standards, demonstrable short-term improvements have not been lost on U.S. investors.

This year, the American Federation of State, County, and Municipal Employees pension fund filed proposals at Home Depot, US Bancorp, Countrywide Financial, and Merrill Lynch, calling on the firms to give shareholders an advisory vote on compensation committee reports. Support for the proposal averaged nearly 40 percent, which, analysts note, is remarkably high for a first-year submission and will likely prompt similar proposal filings in 2007.